I have both formal training and a huge passion for trading and investment methods that work. ¬†While I’m not a coder, I do enjoy figuring things out, and a lot of my work has been made available to you for free. ¬†Some content is for¬†members only.
This is the second video on “Scaling In” to positions using Amibroker Formula Language. ¬†It will give you more tools to use in your own back testing!
Now that we have the basics down, this video will look at how to “pyramid”. ¬†Traditionally, the term “Pyramiding” is used because we are reducing the amount we buy each time. ¬†In other words, we might first buy 1000 shares, then 500, then 250, for example.
This example scales in, or pyramids into positions as long as price is above our Moving Average. As you can imaging, we could end up with LOTS of positions if it’s above the Moving Average for quite some time. ¬†To limit positions I show you how to add a Counter, and we count three positions and then stop buying.
I also show you how to change your position size – reduce the amount we are buying – each time and with each successive pyramid. The idea behind that is we are adding to positions, but not TOO much, as the trend ages¬†and becomes likely to reverse.
A few people at Youtube and at ASX Market Watch have asked for an Amibroker video on “Scaling In” to positions, or Pyramiding. ¬†In other words, sometimes we may not want to buy out full position on our first entry signal, and may want to increase it over time.
This two-part series will start by looking at the basics of scaling in using Amibroker Formula Language, with a simple Dollar Cost Averaging example.
The rules change just a little bit – instead of simply setting up a “Buy” condition, now we use “If, Then, Else”. ¬†If our buy signal is true, Then Scale In, otherwise (Else) return no signal.
I love these times in the market.
It’s almost like a holiday – I can focus on doing other videos, learning more for myself, and (this is the best part) spending more time with my family and actually enjoying life. ¬†Little things like taking off to the beach on the weekends for fish & chips and a wade in the warm, sheltered waters nearby.
With a weekly trading system for myself, and a clear signal that the overall market isn’t ready to be bought yet, I’ve got little to do in the markets. ¬†As a good friend of mine once said: “When there’s nothing doing, do nothing”. ¬†In other words, don’t force it. ¬†Or in the words of Warren Buffett “I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.”
Not everyone is able to sit idly in times like this. ¬†They want to find ways to make money all the time,¬†which usually results in over-trading – and losing money instead.
There is another reason these times are a blessing: a down market doesn’t last forever. ¬†During the 2008 Global Financial Crisis it sure felt as though it would last forever, but it eventually ended, and when it did the people with the cash could buy as much of companies that met their entry criteria as their hearts desired. ¬†2009 was a boon year for pretty much everyone. ¬†So having some cash left to buy, and a clear, back-tested method or signal for “when” to buy, is also important.
As expected – the trading systems that hold the most stocks have fared the worst over the last week. ¬†Now, the Leap of Faith trading system has taken the lead by a fraction, as the Dow/Gann trading system has a wider stop loss. ¬†This wide stop loss is great to catch big moves, but it sure hurts a bit when the market moves down.
While I have an “Index Filter”, turning these systems off new positions when the Index is moving down, I don’t have a complete “Off switch”, where a trader might sell all their positions if the Index meets certain criteria.
I have tested a few different combinations over the last two weeks, and using an “Off Switch” certainly reduces draw-downs, but it reduces overall returns as well. ¬†Volatility works both ways – for better¬†in up markets, and for worse in down markets.
If and when my “How To” Amibroker videos start to become fewer each week, I’ll be able to focus more on trading systems and some more research too!
I hope you’ve enjoyed this post. ¬†Have a great week
– Dave McLachlan
More¬†Posts and Videos in the “Three Trading System” series:
Well, when I figured out how to do it, I figured it out the LONG¬†way.
Two¬†great viewers at my site graciously pointed out a total of three easier ways to code it! ¬†Of course I checked them out myself, and even though it took me a while to understand them, when I finally did I realised how powerful these three faster methods were.
They helped me with my coding – thinking of better ways to code things – and I know they can help you too.
A big thanks to Gordon, and Maurice, and the great Cezar Alvarez, who Maurice credited.
It’s great readers and viewers that help make great things happen. ¬†Thank you so much guys!
This week we look at the world markets, and follow up with the single bar trade that formed a bottom on the S&P 500. ¬†Calling these short term bottoms is one thing (which we did, hallelujah), but actually trading them is another thing entirely. ¬†We look at how some people might manage that trade, as it unfolds. ¬†Brilliant stuff.
We also see why the dynamic Support and Resistance of trend lines works so well – especially against the alternative of straight horizontal support and resistance.
It’s all in the video, check it out!
I hope you have enjoyed this post. ¬†Please leave a comment below!